Bank Of England keeps cutting rates, why are some Saving rates still climbing????

mmdmmd

Hi,

I am pretty noob when it comes to these stuff. The bank of England is cutting the interest rates and some Variable Rates Savings seem to be falling too(correct me if I am wrong). But I have some questions.

Why are those fixed rate accounts' rates still climbing?

Are these fix rates going to fall if Bank Of Engliand keeps cutting rates like this?

In general, does a bad economy means high saving rates?

Thank you

chodges84

It's becasue the banks are pretty desperate for money.

The rate at which they borrow from one another (known as the LIBOR) is still high at nearly 6% and banks are reluctant to lend much money from one another.

This, coupled with the continual decline in the housing market is causing banks to go back to basics. They are collecting money through savings and loaning it out for mortgages (but, shock horror, only if you have a deposit).

Riq

Banks want your money so they can lend it.

It's cheaper to them than having to borrow from other banks.

Very basically speaking that is.

Jonny0000

I think I'm right in saying that because of the lack of liquidity in recent month, or available cash flow, banks are paying higher interest rates in order to gets that hands on cash flows that are more expesive to harness elsewhere.

In essence the crunch signals good times for those with substantial savings as they provide much needed access to cash, thus recieving higher interest rates.

JimmyTheWig

... And so a savings account that ties the saver into the bank for a fixed period is even better as they can then guarantee they will have that money to lend out.
I guess it's all just supply and demand.
But in general, when BoE interest rates fall then savings rates fall.

Reestit_Mutton

JimmyTheWig wrote: »

I guess it's all just supply and demand. But in general, when BoE interest rates fall then savings rates fall.

This is only really true for instant-access variable rate accounts.

Fixed rate accounts, on the other hand, don't follow current BoE base rates. They are generally priced relative to money market rates. Money market rates tend to take account of where analysts predict BoE base rates will be in the future.

In the current climate it is clear that money market rates for long-term money (where it is available) are punitive, hence the rates on offer to entice retail deposits have remained stubbornly high.

HtH
Reestit Mutton

mmdmmd

Reestit_Mutton wrote: »

This is only really true for instant-access variable rate accounts.

Fixed rate accounts, on the other hand, don't follow current BoE base rates. They are generally priced relative to money market rates. Money market rates tend to take account of where analysts predict BoE base rates will be in the future.

In the current climate it is clear that money market rates for long-term money (where it is available) are punitive, hence the rates on offer to entice retail deposits have remained stubbornly high.

HtH
Reestit Mutton

Thanks for the reply.
Would you say that based on the current reason behind the economy slump, the fix rates are likely to go even higher?

JimmyTheWig

Reestit_Mutton wrote: »

Fixed rate accounts, on the other hand, don't follow current BoE base rates. They are generally priced relative to money market rates. Money market rates tend to take account of where analysts predict BoE base rates will be in the future.

Agreed. Thanks for expanding.

MattB_4

I would suggest that rates will certainly increase as we get towards the summer. In the industry we are all aware that there is a LARGE amount of maturing fixed rate money in the September/October period (and through to Dec really). It's certainly going to be an interesting time. Rates will be competitive to ensure retention, let alone acquisition of new money, is happening.

moneylover

Libor has gone down a bit hasnt it? So the high rate one year bonds may start to drop? Or are there different Libor rates for different time spans?

Is there somewhere you can see these rates?

bristolleedsfan

moneylover wrote: »

Libor has gone down a bit hasnt it? So the high rate one year bonds may start to drop? Or are there different Libor rates for different time spans?

Is there somewhere you can see these rates?

https://www.emoneyfacts.co.uk/news/markets.aspx